North Korean Economy Watch

UPDATE: Last week I reported this story in Radio Free Asia.

ORIGINAL POST: In The Armed Forces of North Korea Joseph Bermudez gives a thorough accounting of most of the DPRK’s airfields, airports, highway strips, and air force bases.  Since the book was published in 2001, however, it is slightly out of date. This week I found a new North Korean runway in Kumgang County which appears to have been built between 2007-5-21 and 2012-9-22 to replace a disused runway five miles to the south.

Pictured above (Google Earth): I have outlined Kumgang County and show the positions of the old and new runways.

The former runway strip (documented in The Armed Forces of North Korea) is located just a mile north of the town of Kumgang. It appears to have fallen into disuse:

The nearby Kumgang-chon River has eroded a southern portion of the runway. It also appears a small drainage canal has been dug across a central section of the unpaved runway.

The new Kumgang Airfield is more sophisticated:

To begin with, the runway (appx 1km x 70m) is paved.

I was curious as to whether this runway is intended to serve primarily for civilian or military purposes. Evidence in favor of civilian use: The runway is close to Inner-Kumgang. Tourists could conceivably fly to this airport and drive appx 20 km (by road) to the Inner Kumgang Rest House. Tourists could also drive 35km to the Kumgang resort. Additionally, there is already a large North Korean air force base just 20km due north of the new runway in Thongchon County. I am not sure if an Air Koryo IL-62M can take off/land on this new runway, but certainly any of the commuter prop planes that carry tourists on domestic flights should not  find it too difficult.

Evidence for military use: As of September, there is yet to be built any infrastructure that would serve as a “civilian” airport terminal or air traffic control tower (I use the word “civilian”, but the KPA Air Force controls all of the DPRK’s airspace).  These types of infrastructure can be seen at other North Korean “civilian” airports in Pyongyang, Hamhung, and Samjiyon.  It could be that construction is still ongoing. Additionally, the airport is currently protected by a small number of hardened artillery positions (HARTs) located next to the runway. Artillery, however, can be seen at other “civilian” airports in the DPRK as well.    Just south of the HARTs we can also see what appears to be some tunneling or excavation work being carried out in the hillside.  The purpose of this work remains unclear:

Pictured above: Huichon Power Station No. 2. Learn more about the power station here and here.

According to Radio Free Asia (RFA):

The power supply in the region had been significantly more consistent since the completion in April of the Huichon No. 2 Power Station—a hydroelectric plant located at a dam in Jagang province, about 175 kilometers (109 miles) northwest of the capital.

But the Pyongyang resident, who spoke to RFA on condition of anonymity during a recent trip to China, said that the dry season had rapidly depleted the dam’s water supply, hampering its rate of operation.

“The situation of Pyongyang’s electricity—which seemed okay until October—has returned to pre-dam levels,” the source said.

“I heard it is because of a lack of water during the winter.”

According to a report by the Associated Press, North Korean officials had touted the dam’s ability to provide “half of Pyongyang’s energy needs” as recently as June.

But even then, the AP reported, citing the plant’s general manager Kim Su Gil, drought had left the river above the dam too low for the power station to reach full capacity.

Select priorities

With the further lack of water during the winter dry season, the source in Pyongyang said, the dam was able to provide regular power to only a few select buildings in the capital, which included monuments to the Kim family regime and dwellings for the city’s elite.

“Only the Kim idolization facilities, apartments for Central Party officials, the [43-story] Koryo Hotel and [the new] Changjeon St. [housing development] have 24-hour electricity, while the districts where ordinary people live can only use electricity for five hours a day,” the source said.

North Korea maintains gathering places for citizens to show their allegiance to ruler Kim Jong Un, his father Kim Jong Il, who died of a heart attack in December last year, and his grandfather Kim Il Sung, the nation’s founder.

The 100,000-home development underway on Changjeon St., which former leader Kim Jong Il ordered after reportedly declaring the streets of the capital to be “pitiful” upon his return from a trip to China, and the Koryo Hotel, the second-largest operating hotel in the city, are two of Pyongyang’s few showpieces.

Electricity for ordinary residents is provided only late at night or around dawn so that people cannot use it during the evening when they really need it, the source said.

He added that people in the capital had come to see the preferential treatment for the city’s elite as “severe discrimination.”

Even in Sinuiju city—which neighbors China’s Dandong city and has traditionally enjoyed a reliable power supply due to its designation as an experimental market economy zone in North Pyongan province—ordinary residents are being limited to five hours a day of electricity, the source said.

He said an area of the city near a statue of Kim Il Sung was recently enjoying 24-hour electricity.

Read the full story here:
New Power Plant Falls Short
Radio Free Asia
Joon Ho Kim
2012-12-7

Using the data published by the Daily NK, Dr. Hanke has constructed this graph of food prices in the DPRK:

According to Dr. Hanke:

“From what little data are available, it would appear that, in the span of six months, the price of rice has increased by nearly 130%. This is par for the course in North Korea, where the price of rice has increased by roughly 28,500% over the last three years.”

Here is the source.

Here is a previous post on Dr. Hanke’s DPRK inflation research.

NK News gets creative: The innovative and informative NKNews.org is selling goodies this holiday season to fund its operations (I wish I had thought of that).  When I saw these playing cards, I laughed out loud:

I think I need these. You can order them here.

Inside Air Koryo: Martyn Williams notified me of this web page put up by tourists that took an aviation tour in the DPRK. Some incredible photos to be seen.  Here is just one:

The photo set also includes interior pictures of the “famous” Ilyushin-14 given to Kim Il-sung. UPDATE: The source claims that Stalin gave the plane to Kim Il-sung in 1955, however, as a reader points out, Stalin died in 1953.

Here is a flickr set put up by another member of the group.

Mobile phones: A few days ago, NK News posted a link to these photos taken by Russian tourists to the DPRK. Among the lot was this great photo of North Koreans filming/photographing fireworks in Pyongyang with their mobile phones:

Rodong Sinmun photoshop: Perhaps it is unfair to hold Rodong Sinmun to the highest standards of professional journalism, but if you are going to photo-shop a picture, at least put some effort into it:

Click picture for larger version.

I am unsure why Rodong Sinmun felt compelled to badly photoshop what would otherwise have been a lovely photo.  Is it really so hard to get a photo of a girl playing a violin in front of her (very loyal) family?

Rodong Sinmun has inspired me to coin a  new word: Frankenphoto. Here is a working definition: When all of the compositional elements of a single photo were originally copied from separate pieces and painfully (badly) rendered together into a new image that at times seems to violate the laws of nature.

Just weird [revised]: Below is a very strange act that appeared on North Korean television. I did not understand it at all. After posting it, however, a reader informs me that is is a knock off of an act that appeared on  Soviet Television.  The original Latvian actor was named Arkady Raikin (Аркадий Райкин). See video of Raikin here. Wikipedia page here.

In this North Korean version, skip to the 3:26 mark.  New characters emerge at 5:26, 7:08, 8:17, 10:06.

Eric T. passes along this amazing satellite photo of the Korean peninsula taken at night on 2012-9-24:

The photo comes from NASA. Click image to see larger version.

When I get some time (maybe this weekend) I will see if I can put names to the lights in North Korea.

Here is the text from the NASA web page:

City lights at night are a fairly reliable indicator of where people live. But this isn’t always the case, and the Korean Peninsula shows why. As of July 2012, South Korea’s population was estimated at roughly 49 million people, and North Korea’s population was estimated at about half that number. But where South Korea is gleaming with city lights, North Korea has hardly any lights at all—just a faint glimmer around Pyongyang.

On September 24, 2012, the Visible Infrared Imaging Radiometer Suite (VIIRS) on the Suomi NPP satellite captured this nighttime view of the Korean Peninsula. This imagery is from the VIIRS “day-night band,” which detects light in a range of wavelengths from green to near-infrared and uses filtering techniques to observe signals such as gas flares, auroras, wildfires, city lights, and reflected moonlight.

The wide-area image shows the Korean Peninsula, parts of China and Japan, the Yellow Sea, and the Sea of Japan. The white inset box encloses an area showing ship lights in the Yellow Sea. Many of the ships form a line, as if assembling along a watery border.

Following the 1953 armistice ending the Korean War, per-capita income in South Korea rose to about 17 times the per-capital income level of North Korea, according to the U.S. Central Intelligence Agency. Worldwide, South Korea ranks 12th in electricity production, and 10th in electricity consumption, per 2011 estimates. North Korea ranks 71st in electricity production, and 73rd in electricity consumption, per 2009 estimates.

A visitor to the DPRK  sent in the picture below.  The photo was taken inside the Kwangbok Area Supermarket, and it gives the impression that the institution is aggressively seeking to earn a profit. How many other socialist department stores are offering temporary rebates?

Here is a translation of the sign:

알 림
Notice

우대표 발급 : (기간 : 4.15 – 4.29)
Preferential issuance : (Date: 4.15 – 4.29)

10만원이상 상품을 산 경우 5000원 (우대표)
Buy more than 100,000 KPW and get 5,000 KPW (preferential coupon)

20만원이상 상품을 산 경우 10000원 (우대표)
Buy more than 200,000 KPW and get 10,000 KPW (preferential coupon)

20만원이상 상품을 산 경우 식당에서 음식물의 총 가격의 10%를 무료봉사
If you buy more than 200,000 KPW you get 10% free service of the total at the food restaurant

100만원이상 상품을 산 경우 식당에서 영구적인 우대봉사 받을 수 있는 카드 1장과 10000원 우대표
If you buy more than 1,000,000 KPW you can get one lifetime preferential service coupon and 10,000 KPW (preferential coupon)

※ 우대표는 4.29일까지 사용할 수 있음.
※ Preferential coupon can be used until April 29

Learn more about the very interesting Kwangbok Area Supermarket here.

The Daily NK reports that coal prices in the DPRK have surged this winter (150,000w/ton in 2011 vs. 300,000w/ton in 2012) . They also report the price in hard currency:

At the time of writing, this coal can be bought at source for $150-$200 per ton. Wholesalers then sell it on in regional centers like Chongjin for up to $300. However, according to Daily NK’s source, “They even say that $300 leaves them with little profit, given the cost of transportation.”

This implies the exchange rate is approaching 10,000 w / 1US$. Exchange rate data shows this trend as well.

The Daily NK gives the following reasons for the price increase:

1. Inflation (2011-11 exchange rate with USD was between 2,9oow – 5,000w. 2012-11 exchange rate 4,000-8,000w)

2. Decreased supply from exhausted mines

3. Exports to China (According to statistics published by the Korean Trade Association in late 2011, coal exports from North Korea to China in the nine months to September that year were worth USD$830 million, double the 2010)

If we had the economic data it would be a fairly straightforward regression to determine the contributions of each of these variables on the price of coal. But we do not have the data.

Read the full article here:
Coal Prices Fuelling Chilly Times
Daily NK
Choi Song Min
2012-12-5

Pictured Above (Google Earth): Pyeonghwa Motors Factory in Nampho. Recent additions highlighted in Yellow.

UPDATE 1 (2013-1-22): In a later interview, the head of Pyeonghwa Motors revealed more information on his compan’y relinquishment of Pyeonghwa Motors, and described their future ambitions.

ORIGINAL POST (2012-12-3): According to Yonhap (via Korea Times):

The source said, “As far as I know, Pyeonghwa Motors is seeking to sell its factory in Nampo for about US$20 million in order to end its auto business.”

…

“The (South Korean) president of the auto firm appears to be eyeing the distribution sector” in North Korea, an official at the foundation said, adding the president may move to a new industry after liquidating the auto business. “But nothing has been determined so far,” the official said.

Pyeonghwa Motors president Park Sang-Kwon is widely expected to hold discussions with the North over the business shift during a North Korean visit scheduled for mid-December, to mark the first anniversary of the death of late North Korean leader Kim Jong-il, who died on Dec. 17.

According to the Wall Street Journal:

The North Korean government is a 30% partner in the car manufacturer.

A unit from the church’s business arm spent about $55 million to build the Pyeonghwa factory in Nampo, a port city on North Korea’s west coast about an hour or so outside of the capital Pyongyang. After the factory was completed in 2002, workers there completed partially built cars, in a form called knockdown kits, that were imported from manufacturers in Italy and China.

But the company appears to have rarely been profitable. In 2009, the firm earned about $700,000 from the sale of 650 cars. About $500,000 of that was remitted to its parent operation in South Korea. The South Korean government noted then that it was the first time a South Korea-based company repatriated profits from North Korea.

The Pyeonghwa Motors web page does not contain any information on this development.  You can view the web page here (english). The last published press release was on 2011-1-11:

The web page does have production and sales data (if you choose to believe it):

No revenue or profit numbers are given on the web page, but it does mention that the factory’s capacity is 10,000 units per year. If these numbers are correct, in 2011 (the most productive year in terms of output) the factory was only running at approximately 19% capacity.

The Pyeonghwa Motors web page also offers a grand vision of the factory’s future (100,000 unit capacity):

However, as Google Earth satellite imagery shows, this plan has yet to come to fruition.

Previous posts on Pyeonghwa Motors here.

Read the full stories here:
Unification Church to wind up auto venture in NK
Yonhap (via Korea Times)
2012-11-28

End of the Road for North Korean Auto Maker?
Wall Street Journal Korea Real Time
Evan Ramstad
2012-11-27

Pictured Above (Google Earth): The Hyesan Market (L) and a street market (R).

According to the Daily NK:

The authorities in Hyesan have embarked on an experiment that permits multiple traders to utilize each stall in the city jangmadang (market).

A source from the Yankang Province city told Daily NK on the 30th, “Hyesan Municipal People’s Committee has been struggling for a while to decide what to do with all these traders in the streets outside the market. So, they’ve decided to try and co-opt them by restarting stall-sharing arrangements. Any trader, even ones who used to trade in the streets, can now operate inside the market as long as they are ready to pay.”

“The traders rotate six days a week, and on Sundays the original stallholder gets to decide who trades there,” the source went on.

However, many of the original stallholders are reportedly angry at the move, according to the source, with many asking why they are being stopped from trading for almost half the week.

“But,” she said, “the Market Management Office is having none of it, so they have little choice but to oblige.”

The idea of stall-sharing has been tried before in Hyesan, but with little success. “Just last year they ordered the same thing to happen,” the source recalled, “but it wasn’t long before things went back to normal.”

That being said, she went on, “Now because the order has come from the Upper (Central Party), they are really trying to do it.”

Defectors from the city and others with experience of trading directly in the market say the measure has far more to do with controlling traders working illegally on the city streets than improving the efficiency of the market itself. In fact, they say the measure is likely to have a deleterious effect on market operations.

Seo Ok Ran, a 42-year old defector now living in the Dongdaemun area of Seoul pointed out, “Last year when they did this I had a hard time finding the right stallholders for the items I needed. At the end of the day, it just reduces trade.”

It is unclear whether the new rules are being applied nationwide, or are restricted to the area under the remit of Hyesan Municipal People’s Committee.

Read the full story here:
Stall-Sharing Returns to Hyesan
Daily NK
Kang Mi Jin
2012-12-1

According to Yonhap (via the Korea Times):

North Korea’s crop imports from China plunged 62 percent in October from a year earlier, data showed on Saturday, spawning speculation Pyongyang’s crop yield was not hit as hard by floods this year as was predicted.

According to the data compiled by the Korea Rural Economic Institute (KREI), North Korea imported 22,331 tons of crops such as flour, rice, corn and bean in October from its neighboring country, compared with 59,369 tons a year earlier.

The October figure was also down 38 percent from the previous month, according to the data.

In the first 10 months of the year, the North imported a total of 239,325 tons of crops from its strongest ally, also down 23 percent from the 310,106 tons a year earlier, the data showed.

The data followed projections North Korea’s crop yield would plunge this year, due mainly to unfavorable weather conditions that swept the country in late-summer, exacerbating the chronic food shortage in the poverty-stricken nation.

…

North Korea imported a total of 376,431 tons of crops from China last year, following 313,694 tons in 2010 and 203,390 tons in 2009, according to the data.

Read the full story here:
NK’s crop import from China dip 62% in October
Yonhap (via Korea Times)
2012-12-1